Canadian labour market is 'unbelievable tight' and can only lead to higher wages: Jean-Francois
Canada’s labor market stalled even as the jobless rate fell to a new record low, hampered by a dearth of new workers.
The economy added 15,300 jobs in April, Statistics Canada reported Friday in Ottawa, fewer than half the 40,000 gain anticipated by economists. The small increase ended a surge that saw Canada create about 410,000 jobs over the previous two months.
The unemployment rate fell to 5.2 per cent in April -- the lowest in data going back to 1976 -- as the economy failed to produce any new growth in the labor force.
With employment already well above pre-pandemic levels, economists and policymakers have been anticipating a slowdown in job creation as the nation struggles to find new workers, amid elevated demand from employers. The imbalance between demand and supply of jobs is a primary reason why the Bank of Canada is tightening monetary policy. Canada’s economy has added almost 1 million jobs over the past year, with employment nearly half a million above February 2020 levels.
“This is an indication that we’re reaching a fairly mature stage in the economic cycle,” Josh Nye, a senior economist at Royal Bank of Canada, told BNN Bloomberg television. “It’s just going to be difficult to generate job gains on the scale that we’ve been used to in the past year or so.”
The yield on benchmark two-year Canada bonds dropped about 4 basis points after the numbers were released to 2.682 per cent as of 8:42 a.m. The loonie was little changed at $1.2836 per U.S. dollar.
Worries that Canada’s economy is up against capacity are stoking expectations the Bank of Canada will aggressively hike interest rates in coming months, including a half-point increase at its policy decision next month. The central bank has raised its policy rate by 0.75 percentage points since early March to 1 per cent, and trading in overnight swaps suggest it will climb another 2 percentage points by the end of this year.
Canada’s labor-force participation rate dipped to 65.3 per cent in April. Adding to evidence of a tightening market, involuntary part-time employment reached 15.7 per cent, a record low.
The data also show the extent to which the economy was impeded by a surge in coronavirus cases last month, as the omicron variant swept the nation. Hours worked fell 1.9 per cent in April, in part because of a jump in COVID-related absences, Statistics Canada said.
Average hourly wages were up 3.3 per cent from a year earlier, little changed from 3.4 per cent in February. For permanent employees, wages were up 3.4 per cent. The nation lost 31,600 full-time jobs in April, which was more than offset by a 47,100 increase in part-time employment.
Construction led declines, with employment in the sector down by 20,700 jobs. Service-related industries posted a 31,400 gain for the month.